Explain why Listed Companies Produce Financial Statements for Externals Users and how These are Regulated in the UK - Coursework Example According to Tracy, J. (2009), these users are interested in â€œfour basic financial aspects of a businessâ€. These four are the â€œsales revenue and profit or loss performanceâ€, the â€œfinancial condition...in particular the solvency prospects of the company, the capital issued by the company and â€œany other claims that directly or indirectly participate in the profit of the businessâ€ and the sources and uses of the companyâ€™s cash flows (Tracy, 2009). Financial statements are especially critical for listed or public companies. These are the companies that are in the centre of the capital market of any country. These capital markets are the source of capital resources, which are needed by any company, in particular, and any economy, in general, to efficiently produce goods and services for the consumption of the public. Thus, the capital market should be effective in order to produce sufficient capital resources. In order to be effective; the participants (i.e., investors) of the capital market must be able to arrive at good investment decisions and must be able to obtain â€œuseful informationâ€ from which they can base these good decisions. ... Recognising this, the various regulatory bodies (both in UK and in Europe) had emphasized the importance of issuing complete, timely and accurate financial statements by its listed companies. Various rules and regulations have been established to regulate the preparation of these listed companiesâ€™ financial statements. Some of these regulations provide general rules and guidelines in the preparation of the financial statements while others are more concerned with ensuring compliance to these rules and guidelines. One such regulation deals with the accounting principles to be utilised by the listed company in the preparation of its financial statement. The most recent regulation that was established for the required accounting principles was the 2002 regulation issued by the European Union (EU). The EU was established â€œto foster economic cooperationâ€ and had â€œevolved into an organisation spanning all areas, from development aid to environmental policyâ€ (EU). It helped established common rules and policies for its country members. As a member of the EU, the UK needs to comply with these rules and policies. One such policy had a direct impact on the financial statement reporting process of listed companies and this is the Regulation (EC) No 1606/2002. In this regulation, the EU specifically stated that it aims to contribute to the â€œefficient and cost â€“ effective functioning of the capital marketâ€ and to protect the investors and maintain confidence in the financial markets. To retain the competitiveness of EUâ€™s capital market, it recognises the need to converge the accounting standards used in the preparation of
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